THEORY OF GST
Goods and Services Tax (GST) is an indirect
tax which was introduced in India on 1 July
2017 and was applicable throughout India
which replaced multiple cascading taxes
levied by the central and state governments.
It was introduced as The Constitution (One
Hundred and First Amendment) Act 2017,
following the passage of Constitution 122nd
Amendment Act Bill. The GST is governed
by a GST Council and its Chairman is the
Finance Minister of India. Under GST, goods
and services are taxed at the following rates,
0%, 5%, 12% ,18% and 28%. There is a
special rate of 0.25% on rough precious and
semi-precious stones and 3% on gold.In
addition a cess of 22% or other rates on top
of 28% GST applies on few items like
aerated drinks, luxury cars and tobacco
products. GST replaced a slew of indirect
taxes with a unified tax and is therefore set to
dramatically reshape the country's 2 trillion
dollar economy.
Contents
1 History
1.1 Launch
2 Taxation scheme
2.1 Taxes subsumed
2.2 HSN code in GST
2.3 Rates
3 Goods and Services Tax Network (GSTN)
4 See also
5 References
6 External links
History
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The reform process of India's indirect tax
regime was started in 1986 by Vishwanath
Pratap Singh, Finance Minister in Rajiv
Gandhis government, with the introduction of
the Modified Value Added Tax (MODVAT).
Subsequently, Manmohan Singh,the then
Finance Minister under P V Narasimha Rao,
initiated early discussions on a Value Added
Tax at the state level.A single common "Goods
and Services Tax (GST)" was proposed and
given a go-ahead in 1999 during a meeting
between the then Prime Minister Atal Bihari
Vajpayee and his economic advisory panel,
which included three former RBI governors IG
Patel, Bimal Jalan and C Rangarajan. Vajpayee
set up a committee headed by the then finance
minister of West Bengal, Asim Dasgupta to
design a GST model.
The Ravi Dasgupta committee was also tasked
with putting in place the back-end technology
and logistics (later came to be known as the
GST Network, or GSTN, in 2017) for rolling
out a uniform taxation regime in the country. In
2002, the Vajpayee government formed a task
force under Vijay Kelkar to recommend tax
reforms. In 2005, the Kelkar committee
recommended rolling out GST as suggested by
the 12th Finance Commission.
After the fall of the BJP-led NDA government
in 2004, and the election of a Congress-led UPA
government, the new Finance Minister P
Chidambaram in February 2006 continued work
on the same and proposed a GST rollout by 1
April 2010. However in 2010, with the
Trinamool Congress routing CPI(M) out of
power in West Bengal, Asim Dasgupta resigned
as the head of the GST committee. Dasgupta
admitted in an interview that 80% of the task
had been done.
In 2014, the NDA government was re-elected
into power, this time under the leadership of
Narendra Modi. With the consequential
dissolution of the 15th Lok Sabha, the GST Bill
approved by the standing committee for
reintroduction lapsed. Seven months after the
formation of the Modi government, the new
Finance Minister Arun Jaitley introduced the
GST Bill in the Lok Sabha, where the BJP had a
majority. In February 2015, Jaitley set another
deadline of 1 April 2017 to implement GST. In
May 2016, the Lok Sabha passed the
Constitution Amendment Bill, paving way for
GST. However, the Opposition, led by the
Congress, demanded that the GST Bill be again
sent back to the Select Committee of the Rajya
Sabha due to disagreements on several
statements in the Bill relating to taxation.
Finally in August 2016, the Amendment Bill
was passed. Over the next 15 to 20 days, 18
states ratified the GST Bill and the President
Pranab Mukherjee gave his assent to it.
A 22-members select committee was formed to
look into the proposed GST laws. State and
Union Territory GST laws were passed by all
the states and Union Territories of India except
Jammu & Kashmir, paving the way for smooth
rollout of the tax from 1 July 2017. There was
to be no GST on the sale and purchase of
securities. That continues to be governed by
Securities Transaction Tax (STT).
Launch
The Goods and Services Tax was launched at
midnight on 1 July 2017 by the President of
India, Pranab Mukherjee, and Prime Minister of
India, Narendra Modi. The launch was marked
by a historic midnight (30 June 1 July) session
of both the houses of parliament convened at the
Central Hall of the Parliament. Though the
session was attended by high-profile guests
from the business and the entertainment
industry including Ratan Tata, it was boycotted
by the opposition due to the predicted problems
that it was bound to lead to for the middle and
lower class Indians. It is one of the few
midnight sessions that have been held by the
parliament - the others being the declaration of
India's independence on 15 August 1947, and
the silver and golden jubilees of that occasion.
Members of the Congress boycotted the GST
launch altogether. They were joined by
members of the Trinamool Congress,
Communist Parties of India and the DMK. The
parties reported that they found virtually no
difference between the GST and the existing
taxation system, claiming that the government
was trying to merely rebrand the current
taxation system. They also argued that the GST
would increase existing rates on common daily
goods while reducing rates on luxury items, and
affect many Indians adversely, especially the
middle, lower middle and poorer classes.
Taxation scheme
Taxes subsumed
The single GST(goods and service taxes)
replaced several former taxes and levies which
included: central excise duty, services tax,
additional customs duty, surcharges, state-level
value added tax and Octroi.Other levies which
were applicable on inter-state transportation of
goods have also been done away with in GST
regime. GST is levied on all transactions such
as sale, transfer, purchase, barter, lease, or
import of goods and/or services. India adopted a
dual GST model, meaning that taxation is
administered by both the Union and State
Governments. Transactions made within a
single state are levied with Central GST
(CGST) by the Central Government and State
GST (SGST) by the State governments. For
inter-state transactions and imported goods or
services, an Integrated GST (IGST) is levied by
the Central Government. GST is a consumption-
based tax, therefore, taxes are paid to the state
where the goods or services are consumed not
the state in which they were produced. IGST
complicates tax collection for State
Governments by disabling them from collecting
the tax owed to them directly from the Central
Government. Under the previous system, a state
would only have to deal with a single
government in order to collect tax revenue.
HSN code in GST
HSN (Harmonized System of Nomenclature) is
an 8-digit code for identifying the applicable
rate of GST on different products as per CGST
rules. If a company has turnover up to RS. 1.5
Crore in preceding financial year then they need
not to mention HSN code while supplying
goods on invoices, if a company has turnover
more than 1.5 Cr but up to 5 Cr then they need
to mention 2 digit HSN code while supplying
goods on invoices and if turnover cross 5 Cr
then they shall mention 4 digit HSN code on
invoices.
Rates
The GST is imposed at variable rates on
variable items. The rate of GST is 2% for soaps
and 28% on washing detergents. GST on movie
tickets is based on slabs, with 18% GST for
tickets that cost less than Rs. 100 and 28% GST
on tickets costing more than Rs.100 and 5% on
readymade clothes.The rate on under-
construction property booking is 12%. Some
industries and products were exempted by the
government and remain untaxed under GST,
such as dairy products, products of milling
industries, fresh vegetables & fruits, meat
products, and other groceries and necessities.
Checkposts across the country were abolished
ensuring free and fast movement of goods.
The Central Government had proposed to
insulate the revenues of the States from the
impact of GST, with the expectation that in due
course, GST will be levied on petroleum and
petroleum products. The central government
had assured states of compensation for any
revenue loss incurred by them from the date of
GST for a period of five years. However, no
concrete laws have yet been made to support
such action.council adopted concept paper
discouraging tinkering with rates.
Goods and Services Tax Network
(GSTN
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this article to reflect recent events or newly
available information. (June 2017)
As per the government website on GST, "Goods
and Services Tax" Network (GSTN) is a
nonprofit organisation proposed to be formed
for creating a website / platform for all the
concerned parties related to the GST, namely
stakeholders, government and taxpayers to
collaborate on a single portal. When up and
running, the portal is supposed to be accessible
to the central government which allows it to
track down every transaction on its end while
taxpayers are advertised to have the ability of
connecting this to their tax returns. However its
efficacy and efficiency is yet to be tested. The
known authorised capital of GSTN is 10 crore
(US$1.6 million) in which Central Government
holds 24.5 percent of shares while the state
government holds 24.5 percent and rest with
private banking firms for smooth running of the
transactions.
PROJECT WORK
ON
GOODS AND SERVICES
TAX
SUBMITTED BY: SUBMITTED TO:
PRAYACH SHARMA ANITA SINGH
